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Gas Just Part of EU-Russian Problems

By Daniel J. Graeber | Thu, 20 December 2012 22:48 | 1

The Ukrainian government postponed a natural gas price meeting with Russian President Vladimir Putin, who's slated to meet with European leaders later this week. Kiev said it wasn’t ready to go ahead with the tense negotiations that are a focal point of European energy security. Europe gets much of its natural gas from Russia, while transits feed both Ukrainian and Russian coffers. Though European leaders are still complaining about Ukraine's parliamentary elections, and the Kremlin now worrying over "color revolutions," an authority in Kiev say there are no signs of "a new gas war."

Contractual disputes between Ukraine and Russian natural gas monopoly Gazprom left downstream consumers in the European Union in the cold during the winters of 2006 and 2009. Those disputes sparked a diplomatic frenzy over various pipeline projects meant to diversify the European energy sector. By next year, a BP-led consortium working in gas-rich Azerbaijan is expected to pick between competing pipeline projects for European gas deliveries. This year, Gazprom started gas deliveries through its Nord Stream pipeline in the Baltic Sea and said in December that it, in theory, started construction of its South Stream pipeline though southern Europe.

Related Article: Ukraine and Russia Gamble over Europe's Gas Supply

Members of the European Parliament said Tuesday that certain projects like pipelines should get fast-track approval. A Portuguese lawmaker said such efforts would "set forth a radically new approach" to European energy projects that are "crucial" to a single energy market.

Last week, MEPs adopted a resolution expressing concern that Ukraine failed "a key test" with its October elections. Those elections were seen as "a step backwards" for the former Soviet republic. Kiev was called on to address political concerns in light of stalled association talks. Meanwhile, the Ukrainian government was tasked by the EU with finding a resolution to the status of former Ukrainian Prime Minister Yulia Tymoshenko. Dubbed the gas princess, Tymoshenko is serving time in jail on corruption charges stemming from her role in 2009 gas talks with Gazprom.

For the Kremlin, Putin later this week is expected to meet a hostile European crowd at a time when public frustration in Russia continues to grow. MEPs last week said Moscow will only be a strategic partner with the EU if it embraces democratic values. European lawmakers said they were frustrated with Moscow's "repressive measures" and called for an "end to the culture of endemic corruption, politically-motivated persecution, arrests and detentions." At home, meanwhile, Putin's advisers are keeping a close eye on the eastern border for any signs of "color revolutions" in the former Soviet republics, like Ukraine's Orange Revolution in 2004.

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An analyst in Kiev said stalled talks with Russia shouldn't be seen as evidence of "a new gas war." Ukraine could experience a sea change in terms of domestic energy issues if shale reserves there prove lucrative. Russia, for its part, has two pipeline options to send gas to its European consumers in a way that avoids the contentious contractual issues that halted gas flows in the 2000s. For Europe, meanwhile, Caspian suppliers may provide a significance source of energy security once pipelines in the Southern Corridor start service in the coming years. But while dilution may be a solution to some of the regional woes, tensions along the eastern European corridor may be indicative of a broader geopolitical shift back to the 1980s.

By. Daniel J. Graeber of Oilprice.com

About the author

Contributor
Daniel J. Graeber
Company: Oilprice.com
Position: Senior Analyst

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  • Ronald Wagner on December 21 2012 said:
    I am a big fan of natural gas from all sources. The Ukraine should develop its own biomass and biogas use while developing shale gas and waiting for pipelines from other areas. Pelletization of agricultural waste. Gas from trash, manure, sewage etc would all be useful in getting by. Pellets can be used in rural homes for heat in
    pellet stoves.

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